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The High Cost of Climate Change: A Warning to Businesses, Investors, and Homeowners

"Risky Business," a new report led by Mike Bloomberg and Henry Paulson, aims to frame climate change in economic terms. Will it make Americans care more about the issue?

(Justmeans/3BL Media) -- So much of how climate change is reported on and understood is through numbers. Here are a few.

350: Safe upper limit, in parts per million, for atmospheric CO2.{1}

401.3: Measured atmospheric CO2 in June 2013.{2}

19: Amount in centimeters the world's oceans have risen between 1901 and 2010.{3}

48.8: Predicted maximum sea level rise in centimeters, at New York City, by mid-century.{4}

3.7: Amount in Celsius of extra global surface warming we will likely get between 2081 and 2100 if greenhouse gas emissions stay roughly on their current path.{5}

40: Percentage rise in the concentration of carbon dioxide in the atmosphere between the years 1750 and 2011.{6}

129.2: Temperature, in degrees Fahrenheit, recorded in California’s Death Valley on June 30, setting a record for the hottest temperature ever recorded on Earth for that month.{7}

257,000: Acres of land burned by the California Rim Fire, the biggest wildfire in Sierra’s recorded history, caused by a number of factors, including drought and abnormal seasons.{8}

5.10: Minimum annual extent of Arctic sea ice in millions of square kilometers in 2013, which is 1.12 million km2 (18%) below the 1981-2010 average.{9}

90: Number of global companies that together account for two-thirds of greenhouse gas emissions.{10}

132: Number of countries that walked out of the U.N. climate talks in Warsaw in protest over rich nations’ refusal to entertain the idea of compensation for extreme climate events.{11}

97: Percent consensus in the international scientific community that climate change is real and very likely caused by human actions.{12}

25: Percent of American public that is "solidly skeptical" of global warming.{13}

THE OTHER NUMBERS: DOLLARS AND CENTS

With all the PPMs and degrees and inches and centimeters and percentages, one kind of number has generally been overlooked: dollars. When the temperatures and sea level rise and the storms and wildfires become more frequent and powerful, there are human and non-human deaths to be sure, but there is also a high economic price to be paid for inaction on the climate front.

It is surprising that there hasn't been a comprehensive assessment of the risks that climate change poses to the economy of the United States. The new report, Risky Business: The Economic Risks of Climate Change in the United States, rectifies that gaping hole in the climate change literature. The report combines peer-reviewed climate science projections through the year 2100 with empirical calculations (processing over 20 terabytes of climate and economic data) that estimate the economic impact of projected changes in temperature, precipitation, sea levels and global weather patterns such as storm activity.

While some of the report's findings may be surprising, what isn't surprising is that the Risky Business Project co-chairs come from the financial world: Michael Bloomberg, former mayor of New York City and founder of Bloomberg LP; Henry Paulson, Jr., former U.S. Secretary of the Treasury; and Thomas Steyer, hedge fund manager, environmentalist and founder of Farallon Capital Management.

"With the oceans rising and the climate changing, the Risky Business report details the costs of inaction in ways that are easy to understand in dollars and cents—and impossible to ignore," said Bloomberg.{14}

"I know a lot about financial risks—in fact, I spent nearly my whole career managing risks and dealing with financial crisis," said Paulson. "Today I see another type of crisis looming: A climate crisis. And while not financial in nature, it threatens our economy just the same."{15}

NO BICKERING HERE: A BIPARTISAN REPORT

The climate change debate in America has been polarized against party lines: The majority of concerned climate change believers identify as or lean toward the Democratic Party, while the majority of climate change skeptics are more likely to identify as or lean Republican.{16}{17}

Considering the fact that, as California Governor Jerry Brown recently told George Stephanopoulos on ABC's This Week, "virtually no Republican" in Washington accepts climate change science{18} (a claim that PolitiFact rated as "mostly true"), it is refreshing—and reassuring—that Risky Business is a bipartisan report backed by a coalition of respected political and economic figures from the left, right and center of the political spectrum.

In addition to the co-chairs (Bloomberg is an independent, Paulson is a Republican and Steyer is a Democrat), the report's committee members include influential voices from both sides of the aisle: Henry Cisneros, former U.S. Secretary of Housing and Urban Development; Gregory Page, Executive Chairman, Cargill, Inc.; Robert E. Rubin, Co-Chairman, Council on Foreign Relations, and former U.S. Secretary of the Treasury; George P. Shultz, Thomas W. and Susan B. Ford Distinguished Fellow at the Hoover Institution, former U.S. Secretary of State and former U.S. Secretary of the Treasury; Donna E. Shalala, President, University of Miami, and former U.S. Secretary of Health and Human Services; Olympia Snowe, former U.S. Senator representing Maine; and Dr. Alfred Sommer, Dean Emeritus, Bloomberg School of Public Health.

Why all the bipartisanship on a report on climate change—one of the most partisan issues in Congress? In an interview with The Wall Street Journal, Page, whose company Cargill regularly supports Republican candidates, gives a clue, saying that he agreed to be a part of Risky Business because the report does not focus on potential solutions, but is rather "the effort of very good scientists to assess potential impacts and a range of outcomes."{19}

As the report states:

"The Risky Business Project does not dictate the solutions to climate change; while we fully believe the U.S. can respond to these risks through climate preparedness and mitigation, we do not argue for a specific set or combination of these policies. Rather, we document the risks and leave it to decision-makers in the business and policy communities to determine their own tolerance for, and specific reactions to, those risks."{20}

CLIMATE CHANGE: BAD FOR THE ECONOMY

Those risks and potential outcomes add up to the report's sobering conclusion: The United States faces significant economic risks due to climate change. To make matters more complex, those risks are different for each region, due to the size and geographic variability of the nation.

Some of the report's key findings:

- Within the next 15 years, higher sea levels combined with storm surge will likely increase the average annual cost of coastal storms along the Eastern Seaboard and the Gulf of Mexico by $2 billion to $3.5 billion. Adding in potential changes in hurricane activity, the likely increase in average annual losses grows to up to $7.3 billion, bringing the total annual price tag for hurricanes and other coastal storms to $35 billion.

- Without adaptation to climate change, some Midwestern and Southern counties could see a decline in yields of more than 10% over the next 5 to 25 years should they continue to sow corn, wheat, soy and cotton, with a 1-in-20 chance of yield losses of these crops of more than 20%. By the end of the century, some states in the Southeast, lower Great Plains, and Midwest risk up to a 50% to 70% loss in average annual crop yields (corn, soy, cotton, and wheat).

- Greenhouse gas-driven changes in temperature will likely necessitate the construction of up to 95 gigawatts of new power generation capacity over the next 5 to 25 years—the equivalent of roughly 200 average coal or natural gas-fired power plants—costing residential and commercial ratepayers up to $12 billion per year.

- There is a 1-in-20 chance that by the end of this century, more than $701 billion worth of existing coastal property will be below mean sea levels, with more than $730 billion of additional property at risk during high tide.

- Average annual losses from hurricanes and other coastal storms along the Eastern Seaboard and the Gulf of Mexico will grow by more than $42 billion due to sea level rise alone. Potential changes in hurricane activity could raise this figure to $108 billion.

- Labor productivity of outdoor workers, such as those working in construction, utility maintenance, landscaping, and agriculture, could be reduced by as much as 3%, particularly in the Southeast. For context, labor productivity across the entire U.S. labor force declined about 1.5% during the famous "productivity slowdown" in the 1970s.

AMERICANS ON CLIMATE CHANGE: WHAT, ME WORRY?

While the findings are certainly troubling for the American economy, the report notes that "the U.S. can still avoid most of the worst impacts and significantly reduce the odds of costly climate outcomes—but only if we start changing our business and public policy practices today."{21}

But getting the message to change our behavior to avoid the worst effects of climate change is not getting through most Americans. As Gallup editor-in-chief Frank Newport recently reported:

"Americans taken as a whole, are not that worried about global warming, despite the fact that many scientists and organizations such as the United Nations continually tell us about the potentially calamitous impact of the warming of the planet. In our recent March update, worry about global warming was dead last on a list of possible environmental concerns and although there have been changes over the years, worry about global warming is no higher now that it was back in 1989, when we first asked about it in this fashion. There are a number of explanations for this; one of the most relevant: politics. Democrats are much more worried about global warming than Republicans and Republicans are most likely to believe that concerns about global warming are exaggerated. Thus it is clearer that many Americans view global warming primarily today through a political lens."{22}

What makes the lack of worry more concerning is the fact that the United States is the world's second biggest emitter of carbon dioxide emissions, behind China. And the impacts of global warming aren't limited to the big emitters; in fact, it is likely the poorer, non-industrial nations that will bear the brunt of all the industrial nation's polluting. Kiribati, for example, a collection of 33 islands in the central Pacific that is home to 100,000 people, will be underwater by the end of the century, according to scientists.{23} In 2005, per capita emissions in Kiribati were only 7% of the global average and less than 2% of U.S. per capita emissions.{24} Kiribati will suffer the greatest effect of climate change—total obliteration—while doing virtually nothing to cause it.

"It's a humbling prospect when a nation has to begin talking about its own demise, not because of some inevitable natural disaster... but because of what we are doing on this planet," said Achim Steiner, executive director of the United Nations Environment Programme (UNEP), in 2008. Calling on the world to find a "collective purpose" to combat climate change, Steiner said, "Unless everyone...on this planet takes their responsibility seriously, we will simply not make a difference."{25} Six years later, and there is still no international climate change accord, just a growing collection of failed conferences.

LOCAL ACTION, GLOBAL EFFECT

Could this report make a dent in public opinion—or public policy? Considering that it focuses on economic risks as opposed to potential solutions—and that it comes with a strong bipartisan support from a wide array of powerful figures, perhaps. One thing is for certain: If the United States addresses climate change now, it won't just be the American economy that will benefit, but people, animals and economies around the globe. To be sure, climate change is not just an American problem, but solving it will require, in large part, an American solution.

According to a recent Gallup poll, Americans are much more worried about the economy (59%) than climate change (24%).{26} Framing the climate change issue in economic terms could help adjust those numbers.

For Kiribati, any solution will be far too late. Kiribati President Anote Tong, who is well known in the climate change community for—as Bloomberg Businessweek's Jeffrey Goldberg put it—"arguing that the industrialized nations of the world are murdering his country"{27}—was a recent guest on CNN's GPS. Host Fareed Zakaria asked him, "What do you think will eventually convince the United States and China and India to get serious about climate change? President Tong replied:

"Let me make the point that whatever is agreed within the United States today, with China, it will not have a bearing on our future, because already, it's too late for us. And so we are that canary. But hopefully, that experience will send a very strong message that we might be on the front line today, but others will be on the front line next—and the next and the next."{28}

The numbers keep adding up to grim reality for future generations, but there is one number that The Onion has pointed out that should make us all think a little differently about our own actions:

7 billion: The number of “key individuals” responsible for climate change.{29}

12. Nearly 200 worldwide scientific organizations hold the position that climate change has been caused by human action. According to NASA, "Ninety-seven percent of climate scientists agree that climate-warming trends over the past century are very likely due to human activities, and most of the leading scientific organizations worldwide have issued public statements endorsing this position." See: NASA. "Consensus: 97% of climate scientists agree." January 30, 2013. http://climate.nasa.gov/scientific-consensus/. Accessed July 16, 2014.

17. At a recent League of Conservation Voters (LCV) dinner in Washington, DC, President Obama mocked the climate deniers in Congress, saying, "In Congress, folks will tell you climate change is hoax or a fad or a plot. A liberal plot." Organizing for Action, the advocacy group supporting the president's agenda, has taken it a step further. They have published a website called "Call Out the Climate Change Deniers," listing the deniers in the House and Senate—all Republicans—and urging voters to "Call these deniers out. Hold them accountable. Ask them if they will admit climate change is a problem."

Reynard Loki covers sustainability, sustainable finance and social innovation. He has written consumer-oriented features, exclusive interviews with CEOs, scholars and social entrepreneurs, and research-intensive think pieces across a wide array of environment- and sustainability-related topics. He is a co-founder of MomenTech, a New York-based experimental production studio whose projects include a ringtone of the call of the endangered Philippine Eagle, created exclusively for the Daet New Media Festival in Camarines Norte, Philippines. He is also a contributing author to "Biomes and Ecosystems: An Encyclopedia" (Salem Press, 2013), a reference encyclopedia that illustrates the biology, geography, history and ecological importance of the world’s various biomes and ecosystems. He is a member of Farm Sanctuary, Sea Shepherd, Global Ethics Network and New York Pigeon Rescue Central.